To boost U.S. economy, bolster steel industry

By JAMES M. TERHUNE - 7/12/2013

Popular interest in "smart" military technologies like stealth, drone and robotic systems tends to obscure this enduring reality: Our military might rests on something far more prosaic--steel. With its diverse array of applications--from military vehicles, tanks and equipment to civilian transportation, infrastructure, machinery and renewable energy systems--steel remains central to our nation's military well-being and our larger economy.

While U.S. steelmaking hasn't dominated the world economy in decades, and employment is way down, the sector remains a key contributor--and has achieved notable strides in recent years.

How far have we fallen? The world's dominant steelmaker from the late 19th century through most of the 20th, the United States at its peak in 1969 produced 141.3 million tons, writes historian John Steele Gordon. But by 2012, our share of the world market had fallen below 6 percent, according to the World Steel Association--behind China (46 percent), the European Union (11 percent) and Japan (7 percent). And India--at 5 percent and gaining--may soon overtake the United States to claim fourth place.

Grim? Yes. But consider also:

U.S. producers generated 88.6 million tons of crude steel in 2012, up from the 2009 trough of 58.2 million tons, WSA reports.

Steelmaking directly employs 153,700 people in this country, and directly or indirectly supports more than 1 million U.S. jobs, according to the American Iron & Steel Institute. Every one job in domestic steelmaking supports seven jobs in the U.S. economy.

The juggernaut that is China continues to gain market share, growing even during the recent recession when the EU, Japan and the United States all contracted. In 2012, China produced 716.5 million tons of crude steel.

Given these trends, is it reasonable to believe the U.S. steel industry won't soon disappear? Is there any hope we can at least slow our loss of market share?

Perhaps. U.S. policymakers took one step in the right direction in April, when the Department of Defense reversed a 2009 decision governing procurement. For 35 years, DoD had been required by law to purchase military steel that was 100 percent made at home. But as the wars in Iraq and Afghanistan boosted demand, the department in 2009 redefined "domestically produced": Only the secondary finishing process need be done here. This change allowed foreign-made steel to enter the supply chain for armor plate used on U.S. military equipment. It also generated concerns that foreign-made steel might lack the integrity necessary for military applications.

As the Iraq war has wound down, however, and as U.S. steel manufacturers have increased capacity, lawmakers persuaded the department to amend the Defense Federal Acquisition Regulations; the 2009 definition of "produced" no longer includes "quenching and tampering" of steel.

But action is needed on many more fronts, such as:

Enforcing fair trade laws. AISI and others have long lamented China's currency manipulations, which unfairly advantage its exports while curbing imports, and its use of state ownership to distort world markets. U.S. leaders must continue to aggressively insist that foreign competitors comply with the spirit and intent of remedies, including the Berry Amendment.

Boosting natural gas. More steel producers are using recently discovered North American natural gas to cost-effectively fuel the melt and manufacture processes. We must do more to discover and safely access these deposits.

Increasing R&D into new steel alloys. The U.S. auto industry owes part of its resurgence to the development of advanced high-strength steels, as designers have exploited their characteristics--superior formability, lighter weight and dent resistance--to produce safer and more fuel-efficient vehicles. Public-private partnerships devoted to metallurgy research would accelerate gains like these.

Continuing to emphasize sustainability. Steel is 100 percent recyclable; more steel was recycled last year than aluminum, copper, paper, glass and plastic combined, AISI reports. Supporting further innovations in sustainability would reduce both the unit cost and the environmental impact of producing steel.

Do we as a nation have the political will to take the decisive and sustained actions necessary to rebuild our steel industry? Or will we stand helplessly by as this once-mighty sector--which remains vital to our economic well-being and military security--fades further into memory?

Jack Welch had it right: "Control your own destiny, or someone else will."

James M. Terhune is president and CEO of T&T Materials Inc.7/12/13 (c) 2013 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email service@rbj.net.